State of the Market Address:
- The Dow, and other indices, continue to surge higher.
- Shiller’s Adjusted S&P P/E ratio is now at 29.11. Arguably the second highest level in history (if we adjust for 2000 distortions) and right behind 1929 top at 29.55.
- Weekly RSI at 77.29. At severely overbought levels. Daily RSI is at 77.22- at severely overbought levels as well.
- Prior years corrections terminated at around 200 day moving average. Located at around 17,100 today (on weekly).
- Weekly stochastics at 98.8. Extremely overbought level associated with prior market peaks. Daily at 98.17 – at severly overbought levels as well.
- VIX/VXX either at or approaching their historic lows. Commercial VIX long interest approaching record highs. Now at 11X net long.
- Last week’s CTO Reports suggest that commercials (smart money) are shifting their positioning to net short. For instance, the Dow is 4X, the S&P is at 2X, Russell 2000 is at 4X and the Nasdaq is at 3X short. That is a significant short position against the market.
In summary: For the time being the market remains in a clear bull trend. Yet, a number of longer-term indicators suggest the market might experience a substantial correction ahead. The market remains at extreme valuation levels and severely overbought on weekly charts. Plus, the “smart money” is positioning for some sort of a sell-off. Short-term, the market is back to being overbought.
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